<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB VALUE
ADVANTAGE
MONEY FUND(R)
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE> 2
[PHOTO OF
CHARLES R. SCHWAB]
Dear Shareholder,
With the support of investors like you, SchwabFunds(R)
continues to be among the largest and fastest-growing
mutual fund families in the nation. Charles Schwab
Investment Management, Inc. (CSIM) manages over $50
billion in assets for more than 2.5 million SchwabFunds
shareholders and offers 30 funds spanning a spectrum of
financial markets and investing styles.
LONG-TERM INVESTMENT STRATEGIES
When it comes to investing, patience is a virtue. Given the market volatility of
recent months, it is important to maintain the discipline to adhere to your
asset allocation plan -- and to ensure you have a diversified investment
portfolio. We created the SchwabFunds Family(R) to offer time-tested strategies
for long-term investing -- Indexing, Asset Allocation, Quantitative Models, and
Fund-of-Funds -- and to provide investors with easy, cost-efficient options to
help achieve portfolio diversification.
COMMITMENT TO VALUE
In our ongoing commitment to provide cost-efficient ways for you to invest, we
recently introduced a new class of shares -- Select Shares(TM) -- for each of
our four index funds. Select Shares can offer investors even greater savings
through significantly lower expense ratios.
EXPANDING CHANNELS OF COMMUNICATION
If you're among the millions of people exploring the Internet, I encourage you
to visit our Web site at www.schwab.com/funds. There you'll find a wealth of
online information on SchwabFunds as well as other resources available at
Schwab. You can also access mutual fund performance data, chart daily net asset
values, request a free fund prospectus, trade fund shares and more -- 24 hours a
day. Continuing our efforts to provide you with up-to-date, useful information,
we have recently added monthly portfolio manager commentaries on selected
SchwabFunds to our Web site. In these commentaries, our expert portfolio
managers give insights into market activity and translate the effects of that
activity on fund performance.
Thank you for placing your trust in SchwabFunds. We will continue to explore new
strategies to help meet your investment needs.
/s/ Charles R. Schwab
Charles R. Schwab
<PAGE> 3
SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS
SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS
MAKE YOUR
MONEY WORK
HARDER!
Use this envelope to easily add to
your Schwab Money Market Funds.
CHARLES SCHWAB
<PAGE> 4
SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS
SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS SCHWAB MONEYFUNDERS
TAKE ADVANTAGE OF THIS OPPORTUNITY TO
ADD TO YOUR SCHWAB MONEY MARKET FUNDS.
Now you can add to your investment by using this convenient envelope and slip
below. Please note that this envelope may not be used for any initial
investments in Schwab Money Market Funds. Please call 1-800-2 NO-LOAD for a
prospectus containing more information including fees and expenses. Be sure to
read the prospectus carefully before investing.
SO DON'T DELAY. USE THIS CONVENIENT
SCHWAB MONEYFUNDER TO SEND YOUR CHECK TODAY!
----------------------------------------------------------------------------
PLEASE DETACH HERE
<TABLE>
<S> <C>
SCHWAB MONEYFUNDER __ __ __ __ - __ __ __ __
Please enclose your check and this completed SCHWAB ACCOUNT NUMBER
MoneyFunder slip in the attached postage-paid
envelope. PLEASE INDICATE HOW YOUR INVESTMENT SHOULD BE ALLOCATED:
- --------------------------------------------- [ ] Add to my sweep money market fund.* $
NAME --------
[ ] Schwab Value Advantage Money Fund*+ $
X --------
- --------------------------------------------- [ ] Schwab Municipal Money Fund--Value*,
SIGNATURE Advantage Shares(TM)+ $
--------
[ ] Check here if you would like more Schwab [ ] Schwab California Municipal Money Fund--Value
MoneyFunders for future use. Advantage Shares(TM) (for California
taxpayers only)+ $
--------
[ ] Schwab New York Municipal Money Fund--
Value Advantage Shares (TM) (for New York
taxpayers only)+ $
--------
*SUBSEQUENT MINIMUM $100, CUSTODIAN & IRA
ACCOUNTS $1. AN INVESTMENT CONSTITUTES THE
PURCHASE OF SHARES IN THE MONEY FUND YOU HAVE TOTAL AMOUNT ENCLOSED $
PREVIOUSLY CHOSEN AS THE PRIMARY FUND FOR --------
YOUR BROKERAGE ACCOUNT.
+ THIS ENVELOPE MAY NOT BE USED FOR INITIAL IF NO FUND IS INDICATED, OR YOUR INVESTMENT IS BELOW THE SUBSEQUENT
PURCHASES OF VALUE ADVANTAGE INVESTMENTS(R). MINIMUM FOR THE VALUE ADVANTAGE INVESTMENTS,+ YOUR INVESTMENT WILL GO
SUBSEQUENT INVESTMENT MINIMUM IS $5,000 INTO THE SWEEP MONEY FUND YOU'VE DESIGNATED IN YOUR SCHWAB ACCOUNT.
($2,000 FOR IRAS AND OTHER RETIREMENT
ACCOUNTS). IF YOU WOULD LIKE MORE
INFORMATION, PLEASE CALL 1-800-2 NO-LOAD.
(C) 1997 Charles Schwab & Co., Inc. (Lift here for more information.)
All rights reserved. Member SIPC/NYSE.
Printed on recycled paper. TF4827(8/97)
CRS 20110
</TABLE>
<PAGE> 5
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS:
1. Fill out the attached Schwab MoneyFunder slip completely, including your
name, account number, signature and the amount of your check.
Please use a separate slip for each account
2. Make your check payable to CHARLES SCHWAB & CO., INC., and enclose your
check with the completed slip in this postage-paid envelope.
3. Then just drop your Schwab MoneyFunder in the mail today--and start putting
your money to work! If you have any questions, don't hesitate to call your
local Schwab office or 1-800-2 NO-LOAD.
THIS ENVELOPE MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. AN
INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
<PAGE> 6
--------------
NO POSTAGE
NECESSARY IF
MAILED IN THE
UNITED STATES
--------------
- ------------------------------------------------------
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 18125 SAN FRANCISCO, CA
- ------------------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
CHARLES SCHWAB & CO INC
PO BOX 7783
SAN FRANCISCO CA 94120-9330
<PAGE> 7
TABLE OF CONTENTS
A Word from SchwabFunds(R) ..................... 2
Schwab Value Advantage Money Fund(R) ........... 4
The Portfolio Management Team .................. 7
Market Overview ................................ 8
Questions to the Portfolio Management Team ..... 13
Glossary of Terms .............................. 14
Portfolio Summary .............................. 15
Financial Statements and Notes ................. 16
<PAGE> 8
A WORD FROM SCHWABFUNDS(R)
We're pleased to report on the performance of the Schwab Value Advantage Money
Fund(R) for the six-month period ended June 30, 1997. This report includes only
the Investor Shares class of the Fund as the Sweep Shares class is currently not
available for purchase. During the reporting period, the Fund continued to
provide investors with higher than average money market fund yields on their
larger cash balances, combined with capital stability and liquidity.
The Value Advantage Investments,(R) which include the Schwab Value Advantage
Money Fund - Investor Shares as well as three tax-advantaged alternatives, were
designed to be longer-term money market investment vehicles for larger balances
that do not require frequent access - and may help fill the cash equivalent
sector in your asset allocation plan. Each fund is managed both to attempt to
provide maximum money market income and to preserve capital.
It is important to note that unlike the sweep money fund products, the Value
Advantage Investments are not designed to transfer cash balances for checks,
margin calls, and other debit balances in your Schwab account. If you expect to
access your money regularly, you may wish to consider investing your short-term
funds in one of our six sweep money fund products. Our sweep money funds, which
also include both taxable and tax-advantaged choices, can be linked to your
Schwab Account to keep all of your money invested and available to automatically
cover day-to-day transactions such as trade settlements.
2
<PAGE> 9
The following pages contain information on the Schwab Value Advantage Money
Fund's(R) performance during the reporting period and on its portfolio. Please
remember that while the Fund seeks to maintain a stable $1.00 share price to
protect your principal, as with all money funds, there can be no assurance that
the Fund will be able to maintain a $1.00 net asset value. It is also important
to understand that your investment in the Fund is not insured or guaranteed by
the U.S. Government.
If you would like more information on the Value Advantage Investments(R) or on
other Schwab Money Market Funds, please call our toll-free line, 1-800-435-4000,
and request a free prospectus which contains more information, including fees
and expenses. Please be sure to read the prospectus before investing.
3
<PAGE> 10
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
PERFORMANCE REVIEW
The table below presents 7-day average yields as of the end of the reporting
period for the Fund. Please remember that money market fund yields fluctuate and
past performance is no guarantee of future results.
YIELD SUMMARY AS OF 6/30/97 1
- ------------------------------------------------
<TABLE>
<CAPTION>
Investor Shares
- ------------------------------------------------
<S> <C>
7-day Current Yield 5.36%
- ------------------------------------------------
7-day Effective Yield 5.50%
- ------------------------------------------------
</TABLE>
YOUR YIELD ADVANTAGE
Schwab Value Advantage Money Fund offers you the potential to earn higher yields
than most money market funds. The Fund is designed for cash reserves that you do
not need to access regularly and as such, has minimum balance and transaction
policies to keep operating expenses low. These lower expenses generally mean
higher yields for Fund shareholders. The chart at the right presents the 7-day
current yields on a weekly basis for the Fund and for the average taxable money
fund. Comparing the yields, the Fund consistently outperformed the average for
its category during the reporting period.
1 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, as of 6/30/97, the 7-day current
and 7-day effective yields for the Fund would have been 5.07% and 5.20%,
respectively.
4
<PAGE> 11
7-DAY CURRENT YIELDS
FOR THE PERIOD FROM 1/7 - 6/24/97 2
[GRAPH]
<TABLE>
<CAPTION>
Schwab Value Advantage
Money Fund(R) - IBC Financial Data's
Investor Shares Money Fund Average
---------------------- ---------------------
<S> <C> <C>
Jan 7, 97 0.0511% 0.0481%
Jan 14, 97 0.0512% 0.0476%
Jan 21, 97 0.0512% 0.0476%
Jan 28, 97 0.0512% 0.0475%
Feb 4, 97 0.0512% 0.0478%
Feb 11, 97 0.0513% 0.0475%
Feb 18, 97 0.0513% 0.0474%
Feb 25, 97 0.0511% 0.0473%
Mar 4, 97 0.0512% 0.0475%
Mar 11, 97 0.0512% 0.0472%
Mar 18, 97 0.0512% 0.0473%
Mar 25, 97 0.0511% 0.0474%
Apr 1, 97 0.0514% 0.0482%
Apr 8, 97 0.0515% 0.0482%
Apr 15, 97 0.0518% 0.0484%
Apr 22, 97 0.0519% 0.0486%
Apr 29, 97 0.0522% 0.0489%
May 6, 97 0.0526% 0.049%
May 13, 97 0.0528% 0.049%
May 20, 97 0.053% 0.0491%
May 27, 97 0.0531% 0.0493%
Jun 3, 97 0.0534% 0.0494%
Jun 10, 97 0.0535% 0.0493%
Jun 17, 97 0.0536% 0.0495%
Jun 24, 97 0.0535% 0.0494%
</TABLE>
2 Source: IBC Financial Data, Inc. Average 7-day current yield of funds in the
first-tier category of taxable money funds for each week ending 1/7 - 6/24/97.
Weekly number of funds in the category ranged from 269 to 277. A portion of the
Fund's fees were waived or reimbursed during the reporting period. Without the
waivers or reimbursements, the 7-day current yields for the Fund would have been
lower.
5
<PAGE> 12
PORTFOLIO COMPOSITION
Schwab Value Advantage Money Fund(R) invests primarily in highly-rated
commercial paper and other corporate obligations, bank certificates of deposit,
time deposits, and bankers' acceptances, as well as in repurchase agreements and
U.S. Government obligations. The chart below illustrates the composition of the
Fund's portfolio as of June 30, 1997 and is not indicative of the holdings after
that date. A complete listing of securities in the Fund's portfolio as of June
30, 1997 is provided in the Schedule of Investments later in this report.
SCHWAB VALUE ADVANTAGE MONEY FUND
PORTFOLIO COMPOSITION AS OF JUNE 30, 1997
[Pie Chart]
<TABLE>
<S> <C>
Commercial Paper & Other Corporate Obligations 71%
Certificates of Deposit 20%
Variable Rate Obligations 5%
Repurchase Agreements 2%
Other 2%
</TABLE>
6
<PAGE> 13
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD - Senior Vice President and Chief Investment Officer, has
overall responsibility for management of the Fund's portfolio. Steve joined
Charles Schwab Investment Management (CSIM) as Vice President and Portfolio
Manager in April 1991 and was promoted to his current position in August 1993.
Prior to joining CSIM, Steve was Vice President and Portfolio Manager at
Federated Investors.
LINDA KLINGMAN - Vice President and Senior Portfolio Manager, has managed Schwab
Value Advantage Money Fund(R) since 1992. Linda joined CSIM as Portfolio Manager
in 1990 and was promoted to her current position in August 1996. Prior to
joining CSIM, Linda was Senior Money Market Trader with AIM Management.
The following Market Overview and answers to questions are provided by the
Portfolio Management Team. A Glossary of Terms is provided for your reference on
page 14.
7
<PAGE> 14
MARKET OVERVIEW
<TABLE>
<CAPTION>
REAL GDP GROWTH RATE
----------------------------------------
<S> <C>
Q1-90 0.041%
Q2-90 0.013%
Q3-90 -0.019%
Q4-90 -0.041%
Q1-91 -0.022%
Q2-91 0.017%
Q3-91 0.01%
Q4-91 0.01%
Q1-92 0.047%
Q2-92 0.025%
Q3-92 0.03%
Q4-92 0.043%
Q1-93 -0.001%
Q2-93 0.019%
Q3-93 0.023%
Q4-93 0.048%
Q1-94 0.025%
Q2-94 0.049%
Q3-94 0.035%
Q4-94 0.03%
Q1-95 0.004%
Q2-95 0.007%
Q3-95 0.038%
Q4-95 0.003%
Q1-96 0.02%
Q2-96 0.047%
Q3-96 0.021%
Q4-96 0.038%
Q1-97 0.049%
Q2-97 0.022%
</TABLE>
Source: Bloomberg L.P.
- - The economy, as measured by the growth of real GDP, continues to expand at a
healthy rate. The real GDP growth rate was 3.6% for the first six months of
1997.
- - The apparent strength of the economy continues to lead to speculation
regarding the potential impact on future inflation and whether more
restrictive Federal Reserve policy is imminent.
- - At the time of this writing, the economy appears poised for growth, continuing
the current economic expansion which began in 1991.
8
<PAGE> 15
U.S. UNEMPLOYMENT RATE
<TABLE>
<CAPTION>
U.S.
Unemployment
Rate
- -----------------------------
<S> <C> <C>
1 Jan-90 0.053
2 Feb-90 0.053
3 Mar-90 0.052
4 Apr-90 0.054
5 May-90 0.053
6 Jun-90 0.051
7 Jul-90 0.054
8 Aug-90 0.056
9 Sep-90 0.057
10 Oct-90 0.058
11 Nov-90 0.06
12 Dec-90 0.062
13 Jan-91 0.063
14 Feb-91 0.065
15 Mar-91 0.068
16 Apr-91 0.066
17 May-91 0.068
18 Jun-91 0.068
19 Jul-91 0.067
20 Aug-91 0.068
21 Sep-91 0.068
22 Oct-91 0.069
23 Nov-91 0.069
24 Dec-91 0.071
25 Jan-92 0.071
26 Feb-92 0.073
27 Mar-92 0.073
28 Apr-92 0.073
29 May-92 0.074
30 Jun-92 0.077
31 Jul-92 0.076
32 Aug-92 0.076
33 Sep-92 0.075
34 Oct-92 0.074
35 Nov-92 0.073
36 Dec-92 0.073
37 Jan-93 0.071
38 Feb-93 0.07
39 Mar-93 0.07
40 Apr-93 0.07
41 May-93 0.069
42 Jun-93 0.069
43 Jul-93 0.068
44 Aug-93 0.067
45 Sep-93 0.067
46 Oct-93 0.067
47 Nov-93 0.065
48 Dec-93 0.064
49 Jan-94 0.067
50 Feb-94 0.066
51 Mar-94 0.065
52 Apr-94 0.064
53 May-94 0.06
54 Jun-94 0.06
55 Jul-94 0.061
56 Aug-94 0.061
57 Sep-94 0.059
58 Oct-94 0.056
59 Nov-94 0.056
60 Dec-94 0.054
61 Jan-95 0.056
62 Feb-95 0.054
63 Mar-95 0.058
64 Apr-95 0.057
65 May-95 0.057
66 Jun-95 0.056
67 Jul-95 0.057
68 Aug-95 0.053
69 Sep-95 0.056
70 Oct-95 0.055
71 Nov-95 0.056
72 Dec-95 0.056
73 Jan-96 0.058
74 Feb-96 0.055
75 Mar-96 0.056
76 Apr-96 0.054
77 May-96 0.056
78 Jun-96 0.053
79 Jul-96 0.054
80 Aug-96 0.051
81 Sep-96 0.052
82 Oct-96 0.052
83 Nov-96 0.053
84 Dec-96 0.053
85 Jan-97 0.054
86 Feb-97 0.053
87 Mar-97 0.052
88 Apr-97 0.049
89 May-97 0.048
90 Jun-97 0.05
</TABLE>
Source: Bloomberg L.P.
- - The unemployment rate during 1996 remained near its lowest point in the
decade. This declining trend continued into 1997, with the May 1997 rate of
4.8% representing the lowest rate since December 1973. Low unemployment rates
typically lead many economists to question whether continued low levels of
unemployment can persist without generating inflationary pressures on wages
and, ultimately, prices.
9
<PAGE> 16
MEASURES OF INFLATION
Source: Bloomberg L.P.
[GRAPH]
<TABLE>
<CAPTION>
QUARTERLY EMPLOYMENT COST INDEX MONTHLY CONSUMER PRICE INDEX
YOY% Change YOY% Change
- ------------------------------- -----------------------------
<S> <C> <S> <C>
Jan-90 0.053 Jan-90 0.052
Feb-90 0.053 Feb-90 0.053
Mar-90 0.053 Mar-90 0.052
Apr-90 0.054 Apr-90 0.047
May-90 0.054 May-90 0.044
Jun-90 0.054 Jun-90 0.047
Jul-90 0.051 Jul-90 0.048
Aug-90 0.051 Aug-90 0.056
Sep-90 0.051 Sep-90 0.062
Oct-90 0.048 Oct-90 0.063
Nov-90 0.048 Nov-90 0.063
Dec-90 0.048 Dec-90 0.061
Jan-91 0.046 Jan-91 0.057
Feb-91 0.046 Feb-91 0.053
Mar-91 0.046 Mar-91 0.049
Apr-91 0.045 Apr-91 0.049
May-91 0.045 May-91 0.05
Jun-91 0.045 Jun-91 0.047
Jul-91 0.043 Jul-91 0.044
Aug-91 0.043 Aug-91 0.038
Sep-91 0.043 Sep-91 0.034
Oct-91 0.042 Oct-91 0.029
Nov-91 0.042 Nov-91 0.03
Dec-91 0.042 Dec-91 0.031
Jan-92 0.041 Jan-92 0.026
Feb-92 0.041 Feb-92 0.028
Mar-92 0.041 Mar-92 0.032
Apr-92 0.035 Apr-92 0.032
May-92 0.035 May-92 0.03
Jun-92 0.035 Jun-92 0.031
Jul-92 0.034 Jul-92 0.032
Aug-92 0.034 Aug-92 0.031
Sep-92 0.034 Sep-92 0.03
Oct-92 0.035 Oct-92 0.032
Nov-92 0.035 Nov-92 0.03
Dec-92 0.035 Dec-92 0.029
Jan-93 0.034 Jan-93 0.033
Feb-93 0.034 Feb-93 0.032
Mar-93 0.034 Mar-93 0.031
Apr-93 0.036 Apr-93 0.032
May-93 0.036 May-93 0.032
Jun-93 0.036 Jun-93 0.03
Jul-93 0.036 Jul-93 0.028
Aug-93 0.036 Aug-93 0.028
Sep-93 0.036 Sep-93 0.027
Oct-93 0.034 Oct-93 0.028
Nov-93 0.034 Nov-93 0.027
Dec-93 0.034 Dec-93 0.027
Jan-94 0.032 Jan-94 0.025
Feb-94 0.032 Feb-94 0.025
Mar-94 0.032 Mar-94 0.025
Apr-94 0.031 Apr-94 0.024
May-94 0.031 May-94 0.023
Jun-94 0.031 Jun-94 0.025
Jul-94 0.031 Jul-94 0.028
Aug-94 0.031 Aug-94 0.029
Sep-94 0.031 Sep-94 0.03
Oct-94 0.03 Oct-94 0.026
Nov-94 0.03 Nov-94 0.027
Dec-94 0.03 Dec-94 0.027
Jan-95 0.03 Jan-95 0.028
Feb-95 0.03 Feb-95 0.029
Mar-95 0.03 Mar-95 0.029
Apr-95 0.03 Apr-95 0.031
May-95 0.03 May-95 0.032
Jun-95 0.03 Jun-95 0.03
Jul-95 0.028 Jul-95 0.028
Aug-95 0.028 Aug-95 0.026
Sep-95 0.028 Sep-95 0.025
Oct-95 0.028 Oct-95 0.028
Nov-95 0.028 Nov-95 0.026
Dec-95 0.028 Dec-95 0.025
Jan-96 0.029 Jan-96 0.027
Feb-96 0.029 Feb-96 0.027
Mar-96 0.029 Mar-96 0.028
Apr-96 0.029 Apr-96 0.029
May-96 0.029 May-96 0.029
Jun-96 0.029 Jun-96 0.028
Jul-96 0.029 Jul-96 0.03
Aug-96 0.029 Aug-96 0.029
Sep-96 0.029 Sep-96 0.03
Oct-96 0.03 Oct-96 0.03
Nov-96 0.03 Nov-96 0.033
Dec-96 0.03 Dec-96 0.033
Jan-97 0.028 Jan-97 0.03
Feb-97 0.028 Feb-97 0.03
Mar-97 0.028 Mar-97 0.028
Apr-97 0.028 Apr-97 0.025
May-97 0.028 May-97 0.022
Jun-97 0.028 Jun-97 0.023
</TABLE>
- - Both the Employment Cost Index and Consumer Price Index (CPI) continued to
remain in check throughout the first half of 1997, reflecting continued low
levels of inflation.
- - For the 12 months ended June 1997, the CPI rose 2.3%, the lowest rate since
February 1987. Its core rate (which excludes the more volatile food and energy
components) rose 2.4%, the lowest rate since 1965.
- - The Federal Reserve has indicated that the economy continues to remain in the
zone where inflation risks are on the upside and that it is poised to act
preemptively by raising interest rates if necessary. The Federal Reserve did
take action in March, increasing the Federal Funds Rate by 0.25% to 5.50%, yet
left rates unchanged at the recent July 1997 Federal Open Market Committee
meeting.
10
<PAGE> 17
YIELDS ON 90-DAY COMMERCIAL PAPER
AND 3-MONTH TREASURY BILLS
FOR THE PERIOD FROM 1/2-6/30/97
<TABLE>
<CAPTION>
90-DAY 3-MONTH
COMMERCIAL PAPER TREASURY BILL
---------------- -------------
<S> <C> <C>
1/2/97 0.0518% 0.0547%
1/3/97 0.0516% 0.0546%
1/6/97 0.0517% 0.0545%
1/7/97 0.0515% 0.0545%
1/8/97 0.0515% 0.0545%
1/9/97 0.0512% 0.0544%
1/10/97 0.0516% 0.0548%
1/13/97 0.0517% 0.055%
1/14/97 0.0516% 0.0548%
1/15/97 0.0514% 0.0546%
1/16/97 0.0516% 0.0545%
1/17/97 0.0515% 0.0544%
1/20/97 0.0515% 0.0544%
1/21/97 0.0515% 0.0545%
1/22/97 0.0516% 0.0544%
1/23/97 0.0516% 0.0544%
1/24/97 0.0516% 0.0544%
1/27/97 0.0519% 0.0545%
1/28/97 0.0519% 0.0545%
1/29/97 0.0517% 0.0545%
1/30/97 0.0517% 0.0545%
1/31/97 0.0515% 0.0545%
2/3/97 0.0511% 0.0544%
2/4/97 0.0513% 0.0544%
2/5/97 0.0512% 0.0543%
2/6/97 0.0513% 0.0542%
2/7/97 0.0512% 0.054%
2/10/97 0.0513% 0.054%
2/11/97 0.0514% 0.054%
2/12/97 0.0514% 0.054%
2/13/97 0.0512% 0.0539%
2/14/97 0.0508% 0.0538%
2/17/97 0.0509% 0.0538%
2/18/97 0.0509% 0.0538%
2/19/97 0.051% 0.0538%
2/20/97 0.0508% 0.0537%
2/21/97 0.0509% 0.0537%
2/24/97 0.0511% 0.0537%
2/25/97 0.0515% 0.0537%
2/26/97 0.0518% 0.0539%
2/27/97 0.052% 0.0544%
2/28/97 0.0522% 0.0545%
3/3/97 0.0523% 0.0543%
3/4/97 0.0523% 0.0546%
3/5/97 0.0519% 0.0546%
3/6/97 0.0521% 0.0546%
3/7/97 0.0521% 0.0548%
3/10/97 0.0519% 0.0541%
3/11/97 0.0517% 0.0545%
3/12/97 0.0519% 0.0546%
3/13/97 0.0523% 0.0547%
3/14/97 0.0523% 0.0548%
3/17/97 0.0525% 0.055%
3/18/97 0.0529% 0.0552%
3/19/97 0.0529% 0.0553%
3/20/97 0.0534% 0.0557%
3/21/97 0.054% 0.0565%
3/24/97 0.0538% 0.0566%
3/25/97 0.0539% 0.0568%
3/26/97 0.0534% 0.057%
3/27/97 0.0537% 0.0571%
3/28/97 0.0537% 0.0575%
3/31/97 0.0532% 0.0577%
4/1/97 0.053% 0.0572%
4/2/97 0.0529% 0.0571%
4/3/97 0.0525% 0.057%
4/4/97 0.0527% 0.057%
4/7/97 0.0527% 0.057%
4/8/97 0.0523% 0.0569%
4/9/97 0.0522% 0.0569%
4/10/97 0.0529% 0.0568%
4/11/97 0.0528% 0.057%
4/14/97 0.0529% 0.0573%
4/15/97 0.0529% 0.0571%
4/16/97 0.0529% 0.0571%
4/17/97 0.0529% 0.057%
4/18/97 0.0528% 0.057%
4/21/97 0.0526% 0.057%
4/22/97 0.0534% 0.057%
4/23/97 0.0534% 0.057%
4/24/97 0.053% 0.057%
4/25/97 0.0531% 0.0572%
4/28/97 0.053% 0.0574%
4/29/97 0.0526% 0.0572%
4/30/97 0.0523% 0.0572%
5/1/97 0.0521% 0.0571%
5/2/97 0.0522% 0.057%
5/5/97 0.0511% 0.057%
5/6/97 0.0517% 0.0569%
5/7/97 0.0522% 0.057%
5/8/97 0.0521% 0.0571%
5/9/97 0.0516% 0.0569%
5/12/97 0.0515% 0.0569%
5/13/97 0.052% 0.0569%
5/14/97 0.0516% 0.0569%
5/15/97 0.0511% 0.057%
5/16/97 0.0518% 0.057%
5/19/97 0.053% 0.0572%
5/20/97 0.052% 0.0577%
5/21/97 0.0512% 0.0569%
5/22/97 0.0517% 0.0567%
5/23/97 0.0516% 0.0566%
5/26/97 0.0516% 0.0566%
5/27/97 0.0511% 0.0566%
5/28/97 0.0513% 0.0567%
5/29/97 0.0501% 0.0567%
5/30/97 0.0494% 0.0568%
6/2/97 0.0484% 0.0568%
6/3/97 0.0507% 0.0567%
6/4/97 0.0507% 0.0567%
6/5/97 0.0511% 0.0567%
6/6/97 0.0504% 0.0569%
6/9/97 0.0503% 0.0568%
6/10/97 0.0503% 0.0567%
6/11/97 0.0496% 0.0567%
6/12/97 0.0495% 0.0566%
6/13/97 0.0496% 0.0564%
6/16/97 0.0497% 0.0564%
6/17/97 0.0504% 0.0564%
6/18/97 0.0507% 0.0564%
6/19/97 0.0507% 0.0564%
6/20/97 0.0506% 0.0564%
6/23/97 0.0515% 0.0563%
6/24/97 0.0518% 0.0563%
6/25/97 0.051% 0.0563%
6/26/97 0.0512% 0.0563%
6/27/97 0.0514% 0.0563%
6/30/97 0.0517% 0.0563%
</TABLE>
- - Although short-term rates were relatively stable during the first quarter of
1997, the spread between commercial paper and U.S. Treasury bill yields
widened significantly during the second quarter. This widening, making
Treasury bill yields relatively less attractive than commercial paper yields,
was a result of the reduced U.S. Treasury bill supply, caused by unexpectedly
large April federal tax receipts, which led to lower government financing
needs. In other words, the spread widening was the result of supply and demand
conditions in the U.S. Treasury bill market, not the result of credit concerns
in the commercial paper market.
Source: Bloomberg L.P.
11
<PAGE> 18
Source: Lehman Brothers, Inc.
[GRAPH]
<TABLE>
<CAPTION>
90-DAY MUNICIPAL COMMERCIAL PAPER YIELDS
FOR THE PERIOD FROM 1/7-6/24/97
- -----------------------------------------
<S> <C>
Jan 7, 97 0.0325
Jan 14, 97 0.0345
Jan 21, 97 0.0345
Jan 28, 97 0.0355
Feb 4, 97 0.034
Feb 11, 97 0.0345
Feb 18, 97 0.0335
Feb 25, 97 0.034
Mar 4, 97 0.0335
Mar 11, 97 0.033
Mar 18, 97 0.034
Mar 25, 97 0.035
Apr 1, 97 0.0345
Apr 8, 97 0.0365
Apr 15, 97 0.036
Apr 22, 97 0.037
Apr 29, 97 0.037
May 6, 97 0.0365
May 13, 97 0.0375
May 20, 97 0.037
May 27, 97 0.037
Jun 3, 97 0.0365
Jun 10, 97 0.037
Jun 17, 97 0.0375
Jun 24, 97 0.037
</TABLE>
- - Short-term municipal commercial paper yields exhibited a pattern similar to
that of taxable commercial paper yields during the reporting period.
12
<PAGE> 19
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED THE FUND'S PORTFOLIO TO
RESPOND TO CHANGES IN INTEREST RATES?
A. During the reporting period, the portfolio managers adjusted the
dollar-weighted average maturity (DWAM) of the Fund as needed in order to
capitalize on opportunities to buy higher yielding money market instruments
resulting from market fluctuations. For example, while most economists had
accurately predicted the 0.25% increase in the Federal Funds Rate prior to the
Federal Open Market Committee meeting held on March 25, 1997, the commercial
paper market had "priced in" or anticipated an even larger increase. We believed
the likelihood of an increase greater than 0.25% was fairly remote and seized
the opportunity to add securities with longer maturities (and higher yields) to
the Fund's portfolio throughout the month of March. In fact, the Fund's DWAM
ranged from 51 days at the beginning of the reporting period to a high of 69
days in early March. Throughout most of the reporting period, the Fund
maintained a DWAM which was comparable to or slightly longer than those of other
funds with similar investment objectives.
Q. WHAT CREDIT STANDARDS DOES THE PORTFOLIO MANAGEMENT TEAM USE IN SELECTING
SECURITIES FOR THE FUNDS?
A. Money market funds are required by law to hold only high-quality securities
which meet certain maturity requirements in their portfolios. Certain of those
securities, known as "first-tier securities," carry the highest credit ratings.
For Schwab Value Advantage Money Fund(R), we continue to take the additional
step of investing only in first-tier securities.
Schwab Value Advantage Money Fund invests primarily in securities issued by
banks or corporations, such as commercial paper, certificates of deposit, time
deposits, bank notes, and bankers' acceptances. Certain securities owned by the
Fund are insured or are backed by a letter of credit issued by first-tier
financial institutions. These arrangements are frequently referred to as "credit
enhancements" because they provide incremental levels of creditworthiness. As
part of our regular credit review process, we continually monitor the credit
quality of both the enhancement providers and the issuers of the Fund's
portfolio securities.
13
<PAGE> 20
GLOSSARY OF TERMS
COMMERCIAL PAPER Short-term, interest-paying obligations with maturities ranging
up to 270 days issued by banks, corporations, and other borrowers.
CREDIT ENHANCEMENTS A bank letter of credit, purchase agreement, insurance, line
of credit, or other instrument that provides an additional level of financial
support for debt securities to supplement the creditworthiness of the issuer.
DOLLAR-WEIGHTED AVERAGE MATURITY (DWAM) A measure of the average maturity of a
mutual fund's entire portfolio, weighted by the value of its individual
holdings.
FEDERAL FUNDS RATE A key interest rate charged by banks when lending money to
other banks overnight.
FEDERAL RESERVE The central bank of the United States that establishes policies
on bank reserves and regulations, determines the discount rate, and tightens or
loosens the availability of credit.
FIRST-TIER SECURITY A security rated in the highest short-term credit rating
category.
MATURITY The length of time before which the issuer of a debt security must
repay the principal amount.
REAL GDP The national Gross Domestic Product (GDP) -- the total value of all
goods and services produced in the U.S. over a specific period of time and
adjusted for the rate of inflation to allow meaningful year-to-year comparisons.
YIELD The rate of return, usually dividend or interest payments, on an
investment, expressed as a percentage of market price.
14
<PAGE> 21
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
PORTFOLIO SUMMARY
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/97 as of 12/31/96 Reporting
(000s) (000s) Period
- --------------------------------------------------
<S> <C> <C>
$12,568,081 $ 10,476,537 20%
- --------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1997*
INVESTOR SHARES
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- ---------------------------------------------
<S> <C> <C>
5.36% 5.28% 5.17%
- ---------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/96 12/31/96 3/31/97 6/30/97
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 22.7% 18.4% 20.0% 22.1%
16 - 30 Days 20.3 18.8 17.7 21.4
31 - 60 Days 26.6 30.8 30.3 21.9
61 - 90 Days 12.7 20.1 14.4 19.4
91 - 120 Days 2.5 6.8 7.5 3.2
Over 120 Days 15.2 5.1 10.1 12.0
Weighted Average 57 Days 50 Days 56 Days 57 Days
- -----------------------------------------------------------------
</TABLE>
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
Percent of
SEC Tier Net Assets
Rating 6/30/97
--------------------------------------------------------
<S> <C>
Tier 1 100.0%
Tier 2 0.0%
--------------------------------------------------------
</TABLE>
- ---------------
* A portion of the Fund's expenses were reduced during the periods. Had these
expenses not been reduced, yields would have been lower.
15
<PAGE> 22
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
COMMERCIAL PAPER AND OTHER
CORPORATE OBLIGATIONS--71.6%(a)
ASSET BACKED SECURITIES--23.2%
Alamo Funding, LP
5.66%, 08/07/97 $ 45,000 $ 44,741
5.64%, 08/19/97 40,000 39,696
Alpha Finance Corp.
5.80%, 09/24/97 7,000 6,907
Asset Securitization Cooperative Corp.
5.70%, 08/01/97 102,750 102,250
5.68%, 08/21/97 65,000 64,484
5.71%, 09/08/97 20,000 19,785
Barton Capital Corp.
5.71%, 07/29/97 29,000 28,873
5.65%, 08/25/97 8,812 8,737
5.70%, 08/26/97 37,017 36,693
5.66%, 08/27/97 31,596 31,316
5.67%, 09/15/97 37,497 37,054
Beta Finance, Inc.
5.53%, 08/04/97 12,000 11,939
CC (USA), Inc.
5.74%, 07/21/97 20,000 19,937
5.73%, 07/22/97 62,000 61,796
5.74%, 08/15/97 15,000 14,894
5.69%, 09/12/97 7,000 6,920
5.89%, 11/26/97 10,000 9,765
Corporate Receivables Corp.
5.68%, 07/02/97 20,000 19,997
5.74%, 07/10/97 30,000 29,958
5.73%, 07/17/97 15,000 14,962
5.74%, 07/18/97 45,000 44,880
5.73%, 07/18/97 11,000 10,971
5.71%, 07/23/97 57,000 56,804
5.69%, 07/30/97 30,000 29,864
5.76%, 08/05/97 35,000 34,807
5.71%, 09/02/97 20,000 19,803
5.71%, 09/08/97 25,000 24,731
5.66%, 09/08/97 20,000 19,786
5.66%, 09/10/97 7,000 6,923
5.71%, 09/12/97 20,000 19,772
</TABLE>
16
<PAGE> 23
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
CXC, Inc.
5.71%, 07/07/97 $ 25,000 $ 24,976
5.71%, 07/08/97 15,000 14,984
5.69%, 07/10/97 40,000 39,944
5.74%, 07/14/97 30,000 29,939
5.73%, 07/21/97 30,000 29,906
5.73%, 07/22/97 30,000 29,901
5.77%, 08/01/97 20,000 19,902
5.64%, 08/12/97 15,000 14,902
5.66%, 08/18/97 25,000 24,813
5.65%, 08/20/97 11,000 10,915
5.67%, 08/26/97 25,000 24,782
5.66%, 08/27/97 20,000 19,823
5.70%, 09/04/97 50,000 49,493
Dakota Certificates Program of Citibank
Credit Card Master Trust I
5.72%, 07/21/97 12,000 11,962
5.72%, 07/24/97 30,000 29,892
5.66%, 08/07/97 27,782 27,622
5.63%, 08/15/97 37,824 37,561
5.66%, 08/19/97 29,000 28,779
5.71%, 08/28/97 50,000 49,546
5.66%, 09/22/97 13,000 12,833
Delaware Funding Corp.
5.73%, 07/18/97 50,000 49,867
5.72%, 07/21/97 15,726 15,677
5.71%, 07/25/97 37,211 37,071
5.70%, 08/29/97 97,000 96,107
Enterprise Funding Corp.
5.74%, 07/09/97 18,510 18,487
5.71%, 07/18/97 19,914 19,861
5.70%, 07/23/97 28,000 27,903
5.71%, 07/24/97 89,610 89,287
5.70%, 07/24/97 28,279 28,177
5.71%, 07/25/97 40,000 39,850
5.63%, 08/12/97 31,678 31,472
5.66%, 09/19/97 40,010 39,514
Eureka Securitization, Inc.
5.72%, 07/09/97 39,000 38,951
5.72%, 07/11/97 15,000 14,977
5.73%, 07/22/97 25,000 24,918
5.75%, 08/08/97 14,000 13,916
5.70%, 08/22/97 20,000 19,837
5.66%, 08/27/97 13,000 12,885
5.66%, 09/15/97 20,000 19,764
5.66%, 09/17/97 28,000 27,661
Falcon Asset Securitization Corp.
5.73%, 07/28/97 71,620 71,317
</TABLE>
17
<PAGE> 24
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Kitty Hawk Funding Corp.
5.72%, 09/02/97 $ 30,000 $ 29,704
5.68%, 09/17/97 19,000 18,769
Market Street Funding Corp.
5.69%, 07/28/97 30,000 29,873
5.69%, 07/29/97 25,000 24,891
5.64%, 08/04/97 10,000 9,947
5.66%, 08/15/97 10,000 9,930
Preferred Receivables Funding Corp.
5.73%, 07/14/97 23,475 23,427
5.73%, 07/16/97 13,475 13,443
5.73%, 07/21/97 38,888 38,766
5.68%, 08/26/97 15,000 14,869
5.66%, 09/12/97 35,210 34,811
Providian Master Trust Series 1993-3
5.74%, 07/24/97 22,872 22,789
Ranger Funding Corp.
5.70%, 07/03/97 24,000 23,992
5.71%, 07/18/97 30,000 29,920
5.74%, 07/22/97 14,000 13,954
5.65%, 08/25/97 8,000 7,932
Receivables Capital Corp.
5.67%, 07/11/97 10,125 10,109
5.63%, 08/13/97 21,996 21,849
WCP Funding, Inc.
5.68%, 07/16/97 25,000 24,941
5.71%, 07/18/97 10,000 9,973
5.71%, 07/22/97 25,000 24,918
5.70%, 08/28/97 10,000 9,909
5.66%, 09/10/97 10,000 9,890
5.66%, 09/12/97 17,000 16,808
Windmill Funding
5.69%, 07/03/97 13,306 13,302
5.73%, 07/17/97 15,211 15,173
5.76%, 07/23/97 6,695 6,672
5.76%, 07/30/97 22,000 21,899
5.76%, 07/30/97 27,094 26,970
5.77%, 07/31/97 25,379 25,259
5.74%, 08/14/97 28,000 27,806
5.71%, 09/12/97 15,000 14,829
5.69%, 09/17/97 18,689 18,462
5.68%, 09/24/97 38,000 37,498
</TABLE>
18
<PAGE> 25
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Wood Street Funding Corp.
5.61%, 07/28/97 $ 13,707 $ 13,650
5.70%, 07/29/97 10,000 9,956
5.65%, 08/19/97 10,095 10,018
5.66%, 08/29/97 25,000 24,771
5.66%, 09/16/97 25,000 24,702
-----------
2,915,400
-----------
AUTOMOTIVE--5.3%
American Honda Finance Corp.
5.61%, 07/21/97 10,000 9,969
5.69%, 08/28/97 50,000 49,546
Chrysler Financial Corp.
5.66%, 08/04/97 50,000 49,735
5.66%, 08/05/97 10,000 9,945
Ford Credit Europe PLC
5.71%, 07/11/97 25,000 24,961
5.71%, 07/14/97 25,000 24,949
5.53%, 07/30/97 30,600 30,467
5.68%, 08/27/97 42,000 41,628
General Motors Acceptance Corp.
5.58%, 07/10/97 29,000 28,961
5.59%, 08/01/97 43,000 42,799
5.58%, 08/08/97 9,000 8,949
5.55%, 08/13/97 85,000 84,453
5.49%, 08/28/97 62,000 61,468
5.49%, 08/29/97 48,000 47,581
6.00%, 10/08/97 94,000 92,493
6.00%, 10/10/97 25,000 24,592
6.01%, 11/03/97 11,000 10,777
6.00%, 11/17/97 22,000 21,506
-----------
664,779
-----------
BANKING--AUSTRALIA--0.9%
Commonwealth Bank of Australia
5.62%, 09/12/97 10,000 9,889
Westpac Capital Corp.
5.52%, 07/02/97 47,000 46,993
5.53%, 07/21/97 10,000 9,970
5.55%, 07/22/97 20,000 19,937
5.54%, 07/31/97 25,000 24,888
-----------
111,677
-----------
BANKING--BELGIUM--2.4%
BBL North America
5.72%, 07/08/97 44,000 43,952
5.72%, 07/10/97 50,000 49,930
5.68%, 08/25/97 25,000 24,786
5.71%, 09/09/97 30,000 29,672
</TABLE>
19
<PAGE> 26
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Cregem North America, Inc.
5.74%, 08/11/97 $ 11,000 $ 10,929
5.68%, 08/22/97 100,000 99,191
Generale Bank, Inc.
5.55%, 07/24/97 43,000 42,852
-----------
301,312
-----------
BANKING--CANADA--1.7%
Bank of Nova Scotia
5.59%, 07/15/97 50,000 49,895
5.68%, 08/25/97 50,000 49,572
5.65%, 09/16/97 45,000 44,464
5.66%, 09/25/97 49,000 48,348
Royal Bank of Canada
5.94%, 11/07/97 16,000 15,670
-----------
207,949
-----------
BANKING--DENMARK--1.0%
Unifunding Inc.
5.74%, 07/01/97 17,000 17,000
5.73%, 07/16/97 37,000 36,913
5.68%, 08/22/97 40,000 39,677
5.68%, 09/05/97 29,000 28,702
-----------
122,292
-----------
BANKING--DOMESTIC--3.4%
Bankers Trust New York Corp.
5.95%, 10/29/97 122,000 119,654
International Securitization Corp./
(First National Bank of Chicago LOC)
5.72%, 07/10/97 13,890 13,870
5.77%, 07/17/97 24,115 24,054
5.75%, 07/25/97 32,335 32,213
5.77%, 08/08/97 43,000 42,742
5.75%, 08/11/97 32,725 32,514
5.74%, 08/12/97 20,000 19,868
5.67%, 09/16/97 15,000 14,821
5.67%, 09/22/97 6,000 5,923
Nationsbank Corp.
5.73%, 07/09/97 5,000 4,994
5.71%, 07/16/97 50,000 49,883
Nationsbank Corp. (d)
5.61%, 08/01/97 25,000 24,880
Secured Short Term Notes 97-11
5.86%, 09/18/97 30,000 30,000
Vehicle Services of America/
(Nationsbank of Texas LOC)
5.73%, 09/04/97 12,000 11,878
-----------
427,294
-----------
</TABLE>
20
<PAGE> 27
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--NETHERLANDS--0.5%
Internationale Nederlanden (U.S.) Funding
Corp.
5.50%, 07/03/97 $ 57,000 $ 56,983
-----------
BANKING--SPAIN--0.5%
B.B.V. Finance (Delaware), Inc.
5.55%, 07/15/97 30,000 29,936
BEX America Finance, Inc.
5.68%, 08/21/97 25,000 24,802
5.66%, 09/23/97 12,000 11,844
-----------
66,582
-----------
BANKING--SWEDEN--1.0%
Nordbanken of North America, Inc.
5.68%, 08/15/97 45,000 44,685
5.68%, 09/08/97 16,000 15,828
Svenska Handelsbanken, Inc.
5.73%, 07/15/97 69,600 69,447
-----------
129,960
-----------
BANKING--UNITED KINGDOM--2.7%
Abbey National N.A. Corp.
5.50%, 07/11/97 25,000 24,963
Abbey National Treasury Services PLC
6.26%, 04/02/98 110,000 109,866
Bradford & Bingley Building Society
5.69%, 09/12/97 24,000 23,727
Cheltenham & Gloucester PLC
5.53%, 07/25/97 42,000 41,850
Halifax PLC
5.60%, 09/11/97 70,000 69,238
Yorkshire Building Society
5.53%, 07/08/97 30,000 29,969
5.72%, 07/14/97 43,500 43,411
-----------
343,024
-----------
COMPUTERS AND OFFICE EQUIPMENT--0.3%
CSC Enterprises
5.66%, 08/05/97 20,000 19,891
5.70%, 09/11/97 17,000 16,809
-----------
36,700
-----------
ELECTRICAL AND ELECTRONICS--0.8%
General Electric Company
6.20%, 07/01/97 62,665 62,665
5.73%, 07/16/97 37,000 36,913
-----------
99,578
-----------
</TABLE>
21
<PAGE> 28
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
FINANCE--COMMERCIAL--3.7%
CIT Group Holdings, Inc.
5.71%, 07/24/97 $ 42,000 $ 41,849
Finova Capital Corp.
5.69%, 09/18/97 37,000 36,544
General Electric Capital Corp.
5.73%, 07/17/97 35,000 34,912
5.95%, 11/04/97 30,000 29,394
5.95%, 11/05/97 30,000 29,389
5.85%, 11/26/97 49,000 47,856
General Electric Capital Services
5.67%, 08/26/97 50,000 49,565
5.85%, 11/28/97 50,000 48,817
Heller Financial, Inc.
5.56%, 07/08/97 15,000 14,984
5.81%, 07/22/97 10,000 9,967
5.95%, 09/18/97 14,000 13,821
5.92%, 10/07/97 13,000 12,795
5.92%, 10/10/97 40,000 39,349
5.81%, 10/16/97 42,000 41,288
5.92%, 10/27/97 16,000 15,696
-----------
466,226
-----------
FINANCE--CONSUMER--3.8%
Associates Corp. of North America
5.68%, 07/02/97 56,000 55,991
5.71%, 07/08/97 25,000 24,973
5.71%, 07/10/97 50,000 49,930
5.73%, 07/28/97 50,000 49,789
5.73%, 07/29/97 50,000 49,781
5.63%, 08/06/97 50,000 49,721
5.64%, 08/07/97 39,000 38,776
5.64%, 08/14/97 50,000 49,659
5.63%, 08/19/97 70,000 69,469
5.68%, 09/18/97 42,000 41,485
-----------
479,574
-----------
MISCELLANEOUS MANUFACTURING--0.4%
Newell Company
5.65%, 08/20/97 21,000 20,837
5.69%, 09/16/97 30,000 29,640
-----------
50,477
-----------
</TABLE>
22
<PAGE> 29
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
MISCELLANEOUS SERVICES--1.8%
PHH Corp.
5.63%, 07/21/97 $ 25,000 $ 24,923
5.63%, 07/22/97 25,000 24,919
5.64%, 07/25/97 23,000 22,914
5.76%, 07/30/97 75,000 74,655
5.72%, 09/12/97 12,000 11,863
5.66%, 09/18/97 30,000 29,633
5.68%, 09/19/97 15,000 14,813
5.67%, 09/25/97 20,000 19,733
-----------
223,453
-----------
MORTGAGE BANKING--0.9%
Countrywide Home Loans, Inc.
5.64%, 08/04/97 50,000 49,735
5.69%, 09/12/97 25,000 24,716
5.68%, 09/19/97 33,000 32,589
-----------
107,040
-----------
PAPER AND WOOD PRODUCTS--0.1%
Rexam PLC
5.71%, 09/02/97 9,000 8,911
-----------
PHARMACEUTICALS--0.1%
Glaxo Wellcome PLC
5.66%, 09/23/97 19,000 18,753
-----------
SAVINGS AND LOAN--0.2%
Bank of America, FSB
5.69%, 09/02/97 23,000 22,775
-----------
SECURITIES BROKERAGE-DEALER--16.9%
Bear Stearns Companies, Inc.
5.53%, 07/31/97 50,000 49,776
5.71%, 09/10/97 50,000 49,446
5.70%, 09/17/97 50,000 49,392
5.69%, 09/18/97 10,000 9,877
5.66%, 09/26/97 55,000 54,258
BT Securities Corp.
5.50%, 07/01/97 15,000 15,000
5.78%, 12/16/97 10,000 9,738
Credit Suisse First Boston, Inc.
5.68%, 08/27/97 60,000 59,468
5.97%, 10/24/97 25,000 24,538
</TABLE>
23
<PAGE> 30
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Goldman Sachs Group, LP
5.53%, 07/14/97 $ 68,000 $ 67,868
5.98%, 10/30/97 50,000 49,026
5.90%, 11/10/97 48,000 46,993
5.90%, 11/12/97 125,000 122,339
5.90%, 11/13/97 100,000 97,855
5.89%, 11/25/97 128,000 125,017
Lehman Brothers Holdings, Inc.
5.65%, 08/06/97 6,000 5,966
5.48%, 08/08/97 78,000 77,560
5.79%, 09/22/97 40,000 39,482
5.94%, 09/24/97 5,000 4,932
5.92%, 12/04/97 60,000 58,505
5.84%, 12/10/97 54,000 52,622
5.83%, 12/17/97 21,000 20,442
5.82%, 12/22/97 17,000 16,536
Merrill Lynch & Co., Inc.
5.55%, 07/23/97 100,000 99,670
5.71%, 09/09/97 14,000 13,847
5.71%, 09/11/97 30,000 29,663
5.95%, 11/03/97 22,000 21,560
Morgan Stanley, Dean Witter, Discover & Co.
5.67%, 07/08/97 50,000 49,945
5.68%, 07/15/97 40,000 39,913
5.69%, 07/21/97 46,000 45,856
5.69%, 07/23/97 50,000 49,828
5.69%, 07/24/97 50,000 49,820
5.70%, 07/29/97 120,000 119,475
5.70%, 09/10/97 33,000 32,635
5.70%, 09/12/97 31,815 31,452
5.70%, 09/16/97 92,000 90,896
5.66%, 09/23/97 32,000 31,584
PaineWebber Group, Inc.
5.83%, 08/06/97 40,000 39,770
Salomon, Inc.
5.94%, 08/25/97 35,000 34,687
5.91%, 08/26/97 30,000 29,728
5.92%, 08/27/97 30,000 29,723
5.86%, 09/23/97 10,000 9,865
</TABLE>
24
<PAGE> 31
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Smith Barney, Inc.
5.71%, 07/08/97 $ 30,000 $ 29,967
5.70%, 07/09/97 91,000 90,886
5.70%, 07/10/97 50,000 49,930
-----------
2,127,336
-----------
TOTAL COMMERCIAL PAPER AND OTHER CORPORATE
OBLIGATIONS
(Cost $8,988,075) 8,988,075
-----------
CERTIFICATES OF DEPOSIT--19.7%
BANKING--AUSTRALIA--0.2%
Australia & New Zealand Bank Group
5.54%, 07/07/97 20,000 20,000
-----------
BANKING--BELGIUM--0.2%
BBL North America
5.75%, 08/05/97 22,000 22,000
-----------
BANKING--CANADA--1.1%
Bank of Montreal
5.71%, 07/11/97 114,000 114,000
5.56%, 07/16/97 21,000 21,000
-----------
135,000
-----------
BANKING--DOMESTIC--4.2%
Bankers Trust Company
5.53%, 07/09/97 96,000 96,000
5.72%, 07/14/97 80,000 80,000
5.55%, 07/16/97 32,000 32,000
Chase Manhattan Bank USA
5.65%, 09/08/97 90,000 90,000
5.65%, 10/02/97 58,000 58,000
Crestar Bank
5.71%, 07/07/97 40,000 40,000
MBNA America Bank N.A.
5.80%, 10/07/97 46,000 46,000
Mellon Bank N.A.
5.68%, 08/21/97 50,000 50,000
5.63%, 09/04/97 27,000 27,000
Wilmington Trust Company
5.70%, 08/27/97 24,000 24,000
-----------
543,000
-----------
BANKING--FRANCE--3.8%
Banque Nationale de Paris
5.73%, 07/21/97 13,000 13,000
5.95%, 10/14/97 50,000 50,002
</TABLE>
25
<PAGE> 32
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
Caisse Nationale de Credit Agricole
6.01%, 06/26/98 $ 50,000 $ 49,967
Societe Generale
5.83%, 08/20/97 50,000 49,997
5.81%, 01/08/98 50,000 49,997
5.80%, 01/08/98 50,000 49,992
5.92%, 01/13/98 27,400 27,384
5.89%, 03/03/98 39,000 38,990
5.90%, 03/04/98 25,000 24,995
6.14%, 03/10/98 35,000 34,941
6.25%, 04/08/98 35,000 34,997
6.27%, 04/14/98 50,000 49,993
-----------
474,255
-----------
BANKING--GERMANY--1.6%
Bayerische Hypotheken und Wechsel Bank
5.54%, 07/07/97 50,000 49,999
Deutsche Bank
5.50%, 09/03/97 100,000 100,001
5.50%, 09/04/97 25,000 25,000
Landesbank Hessen-Thuringen Girozentrale
6.20%, 09/05/97 25,000 25,000
-----------
200,000
-----------
BANKING--JAPAN--4.8%
Bank of Tokyo - Mitsubishi, Ltd.
5.71%, 08/06/97 76,000 76,008
5.76%, 09/17/97 11,000 11,000
Dai-Ichi Kangyo Bank, Ltd.
5.83%, 07/03/97 14,000 14,000
5.84%, 07/17/97 50,000 50,001
5.80%, 07/17/97 15,000 15,000
5.80%, 07/18/97 5,000 5,000
5.83%, 07/23/97 50,000 50,000
Industrial Bank of Japan, Ltd.
5.83%, 07/11/97 28,000 28,000
5.84%, 07/17/97 100,000 100,002
5.84%, 07/18/97 40,000 40,000
Sanwa Bank, Ltd.
5.83%, 07/01/97 62,000 62,000
5.83%, 07/16/97 40,000 40,000
5.85%, 08/05/97 10,000 10,000
5.76%, 09/17/97 26,000 26,001
5.77%, 09/19/97 43,000 43,001
Sumitomo Bank, Ltd.
5.84%, 07/25/97 30,000 30,000
5.77%, 08/27/97 12,000 12,000
-----------
612,013
-----------
</TABLE>
26
<PAGE> 33
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
BANKING--NETHERLANDS--0.4%
ABN-AMRO Bank N.V.
5.73%, 07/22/97 $ 25,000 $ 24,999
5.60%, 09/02/97 30,000 30,000
-----------
54,999
-----------
BANKING--SPAIN--0.1%
Banco Bilbao Vizcaya
5.56%, 07/07/97 10,000 10,000
-----------
BANKING--SWITZERLAND--0.2%
Credit Suisse First Boston
6.26%, 04/08/98 25,000 24,996
-----------
BANKING--UNITED KINGDOM--2.6%
Abbey National Treasury Services PLC
5.50%, 07/07/97 100,000 100,000
5.59%, 08/29/97 15,000 15,004
5.55%, 09/03/97 50,000 50,000
5.60%, 09/15/97 75,000 75,000
National Westminster Bank PLC
5.60%, 09/05/97 31,000 31,000
6.20%, 05/20/98 51,000 50,969
-----------
321,973
-----------
SAVINGS AND LOAN--0.5%
World Savings Bank, FSB
5.66%, 09/16/97 60,000 59,997
-----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $2,478,233) 2,478,233
-----------
VARIABLE RATE OBLIGATIONS--5.3%(b)
ASSET BACKED SECURITIES--0.8%
Asset-Backed Securities Investment Trust,
Series 1997-C
5.69%, 06/15/98 50,000 50,000
Ciesco, LP
5.60%, 07/14/97 50,000 49,997
-----------
99,997
-----------
BANKING--DOMESTIC--0.6%
Keystone Health Resources Corporation
Variable Rate Taxable Demand Notes Series
1993/
(PNC Bank LOC)
5.60%, 07/07/97 3,300 3,300
</TABLE>
27
<PAGE> 34
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
New Jersey Economic Development Authority
Variable Rate Title IX Loan Portfolio
Securitization Bonds/ (Fleet National Bank
LOC)
5.64%, 07/07/97 $ 22,600 $ 22,600
PNC Bank, N.A.
5.59%, 07/25/97 40,000 39,985
Town of Islip Industrial Development Agency
1992 Taxable Adjustable Rate Industrial
Development Revenue Bonds (Nussdorf
Associates/Quality King Distributors, Inc.
Facility)/
(European American Bank LOC)
5.93%, 07/07/97 7,180 7,180
-----------
73,065
-----------
BANKING--GERMANY--0.1%
General Obligation Refunding Bonds of the
County of Hudson (State of New Jersey)
(Variable Rate Demand Obligations) Taxable
Series 1995/ (Landesbank Hessen-Thuringen
Girozentrale LOC)
5.60%, 07/07/97 9,300 9,300
-----------
BANKING--JAPAN--0.0%
New York City Industrial Development Agency
Industrial Development Revenue Bonds
(G.A.F. Seelig, Inc. Project)
Series1993/(IBJ Schroder Bank & Trust LOC)
6.00%, 07/07/97 2,130 2,130
-----------
BANKING--UNITED KINGDOM--0.1%
County of Riverside 1990 Taxable Variable
Rate Certificates of Participation
(Monterey Avenue Project)/(National
Westminister Bank PLC/ Commerzbank LOC)
5.90%, 07/07/97 8,100 8,100
-----------
ELECTRICAL AND ELECTRONICS--0.4%
New Jersey Economic Development Authority
Taxable Economic Development Bonds,
MSNBC/CNBC Project, 1997 Series A /(General
Electric Company & Microsoft Corporation
Guarantee)
5.69%, 07/01/97 49,900 49,900
-----------
INSURANCE--1.6%
Commonwealth Life Insurance Company
5.83%, 07/01/97 10,000 10,000
5.77%, 07/01/97 100,000 100,000
</TABLE>
28
<PAGE> 35
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
General American Life Insurance Company
5.89%, 07/07/97 $ 50,000 $ 50,000
Jackson National Life Insurance Company
5.77%, 07/01/97 40,000 40,000
-----------
200,000
-----------
MONOLINE INSURANCE--0.1%
Baptist Health Systems of South Florida, Inc.
Taxable Variable Rate Direct Note
Obligations Series 1995A/ (MBIA Insurance)
5.60%, 07/07/97 6,600 6,600
Baptist Health Systems of South Florida, Inc.
Taxable Variable Rate Direct Note
Obligations Series 1995B/ (MBIA Insurance)
5.60%, 07/07/97 4,500 4,500
New Orleans Aviation Board Taxable Refunding
Bonds, Series 1993A/(MBIA Insurance)
5.77%, 07/07/97 700 700
-----------
11,800
-----------
SECURITIES BROKERAGE-DEALER--1.6%
Bear Stearns Companies, Inc.
5.72%, 07/07/97 50,000 50,000
5.72%, 07/07/97 60,000 60,000
Lehman Brothers Holdings, Inc.
5.74%, 07/30/97 95,000 95,000
-----------
205,000
-----------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $659,292) 659,292
-----------
BANK NOTES--1.2%
BANKING--DOMESTIC--1.2%
FCC National Bank
5.53%, 07/07/97 10,000 10,000
5.65%, 09/09/97 34,000 34,001
First National Bank of Boston
5.72%, 07/08/97 50,000 50,000
5.72%, 07/15/97 60,000 60,000
-----------
TOTAL BANK NOTES
(Cost $154,001) 154,001
-----------
</TABLE>
29
<PAGE> 36
SCHWAB VALUE ADVANTAGE MONEY FUND(R)
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Par Value
-------- -----------
<S> <C> <C>
MUNICIPAL BONDS--0.2%(a)
BANKING--FRANCE--0.2%
City of New York, General Obligation Bonds,
Fiscal 1996 Series A-2/(Societe Generale
LOC)
5.85%, 09/02/97 $ 21,770 $ 21,770
-----------
TOTAL MUNICIPAL BONDS
(Cost $21,770) 21,770
-----------
<CAPTION>
Maturity
--------
<S> <C> <C>
REPURCHASE AGREEMENTS--2.0%(c)
Salomon Brothers, Inc. 6.15%, Issue Date
06/30/97
Due 07/01/97; Tri-Party Repurchase
Agreement;
Collateralized By: U.S. Government Agency
Obligations 250,043 250,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $250,000) 250,000
-----------
TOTAL INVESTMENTS--100%
(Cost $12,551,371) $12,551,371
===========
</TABLE>
30
<PAGE> 37
- ------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
Yields shown are effective yields at the time of purchase, except for variable
rate securities which are described below and treasury notes which reflect the
coupon rate of the security. Yields for each type of security are stated
according to the market convention for that security type. For each security,
cost (for financial reporting and federal income tax purposes) and carrying
value are the same.
(a) Certain securities purchased by the Fund are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are sold to institutional
investors, such as the Schwab Value Advantage Money Fund(R). Any resale
by the Fund must be in an exempt transaction, normally to a qualified
institutional buyer. At June 30, 1997, the aggregate value of private
placement securities held by the Fund was $3,519,824,000 which
represented 28.01% of net assets. Of this total, $3,274,824,000 or
26.06% of net assets, was determined by the Investment Manager to be
liquid in accordance with procedures adopted by the Board of Trustees.
(b) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates as of the
report date. Dates shown represent the latter of the demand date or
next interest rate change date, which is considered the maturity date
for financial reporting purposes. For variable rate securities without
demand features, the next interest reset date is shown.
(c) Due dates shown for repurchase agreements represent either the final
maturity or put date, which is considered the maturity date for
financial reporting purposes.
(d) Security traded on a delayed-delivery basis. Payment and delivery is
scheduled for a future time, generally within two weeks of entering
into the transaction. The transaction is subject to market fluctuation
31
<PAGE> 38
- ------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS (continued)
and to the risk that the value may be more or less than the purchase
price when the transaction was initiated. The Fund has set aside
sufficient investment securities as collateral for securities purchased
on a delayed-delivery basis.
<TABLE>
<CAPTION>
Abbreviations
- ----------------------------------------------------------------
<S> <C>
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
RECOP Remarketed Certificates of Participation
</TABLE>
See accompanying Notes to Financial Statements.
32
<PAGE> 39
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $12,551,371) $12,551,371
Interest receivable 45,102
Receivable for Fund shares sold 81,978
Prepaid expenses 219
-----------
Total assets 12,678,670
-----------
LIABILITIES
Payable for:
Dividends 25,720
Fund shares redeemed 58,617
Investments purchased 24,880
Investment advisory and administration fee 251
Transfer agency and shareholder service fees 515
Other 606
-----------
Total liabilities 110,589
-----------
Net assets applicable to outstanding shares $12,568,081
===========
NET ASSETS CONSIST OF:
Paid-in-capital $12,568,206
Accumulated net realized loss on investments sold (125)
-----------
$12,568,081
===========
PRICING OF SHARES
Outstanding shares, $0.00001 par value (unlimited shares
authorized) 12,568,206
Net asset value, offering and redemption price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
33
<PAGE> 40
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (in thousands)
Six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Interest income $329,195
--------
Expenses:
Investment advisory and administration fee 24,208
Transfer agency and shareholder service fees 14,687
Custodian fees 468
Registration fees 753
Professional fees 78
Shareholder reports 67
Trustees' fees 18
Amortization of deferred organization costs 7
Insurance and other expenses 60
--------
40,346
Less: expenses reduced (see Note 4) (16,847)
--------
Total expenses incurred by Fund 23,499
--------
Net investment income 305,696
--------
Net realized gain on investments sold 0
--------
Increase in net assets resulting from operations $305,696
========
</TABLE>
See accompanying Notes to Financial Statements.
34
<PAGE> 41
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended
June 30, Year ended
1997 December 31,
(Unaudited) 1996
----------- ------------
<S> <C> <C>
Operations:
Net investment income $ 305,696 $ 450,196
Net realized gain on investments sold 0 6
-------- --------
Increase in net assets resulting from
operations 305,696 450,202
-------- --------
Dividends to shareholders from net investment
income (305,696) (450,196)
-------- --------
Capital share transactions (at $1.00 per
share):
Proceeds from shares sold 9,775,040 14,542,131
Net asset value of shares issued in
reinvestment of dividends 330,904 405,539
Less payments for shares redeemed (8,014,400) (11,395,029)
-------- --------
Increase in net assets from capital share
transactions 2,091,544 3,552,641
-------- --------
Total increase in net assets 2,091,544 3,552,647
Net assets:
Beginning of period 10,476,537 6,923,890
-------- --------
End of period $12,568,081 $ 10,476,537
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
35
<PAGE> 42
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1997 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab Value Advantage Money Fund (the "Fund") is a series of The Charles
Schwab Family of Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust on October 20, 1989 and registered
under the Investment Company Act of 1940, as amended. This report includes only
the Investor Shares class of the Fund as the Sweep Shares class is currently not
available for purchase.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab
Institutional Advantage Money Fund(R), Schwab Retirement Money Fund(R), Schwab
Municipal Money Fund, Schwab California Municipal Money Fund and Schwab New York
Municipal Money Fund. The assets of each series are segregated and accounted for
separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions, interest income and realized gains (losses) -- Security
transactions are accounted for on a trade date basis (date the order to buy or
sell is executed). Interest income is accrued daily and includes amortization of
premium and accretion of discount on investments. Realized gains and losses from
security transactions are determined on an identified cost basis.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or U.S. government obligations. All collateral is held by the Funds'
custodian, except in the case of a tri-party agreement, the collateral is held
by an agent bank. The collateral is monitored daily to ensure that its market
value at least equals the repurchase price under the agreement.
36
<PAGE> 43
- ------------------------------------------------------------------------------
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are generally allocated to
each series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of 0.46% of
the first $1 billion of average daily net assets, 0.45% of the next $2 billion,
0.40% of the next $7 billion, 0.37% of the next $10 billion and 0.34% of such
assets in excess of $20 billion. The Investment Manager has reduced a portion of
its fees for the six months ended June 30, 1997 (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of 0.25% of average daily net assets. In addition,
Schwab receives a fee of $5.00 for redemptions in amounts less than $5,000 and
may impose a $5.00 fee for monthly balances below the minimum required. Schwab
has reduced a portion of its fees for the six months ended June 30, 1997 (see
Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended June 30, 1997, the Trust made no direct payments to its
officers or trustees who are "interested persons" within the meaning of the
Investment Company Act of 1940, as amended. The Fund incurred fees of $18,000
related to the Trust's unaffiliated trustees.
37
<PAGE> 44
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the six
months ended June 30, 1997, the total of such fees reduced by the Investment
Manager and Schwab was $8,341,000 and $8,506,000, respectively (see Note 6).
5. INVESTMENT TRANSACTIONS
Purchases and sales, including maturities of investment securities for the six
months ended June 30, 1997, aggregated (in thousands) $22,550,121 and
$20,532,305, respectively.
38
<PAGE> 45
- ------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Six months
ended
June 30, Period Ended
1997 Year ended December 31, December 31,
(Unaudited) 1996 1995 1994 1993 1992++
------------ ----------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ---------- ---------- -------- --------
Income from investment
- --------------
operations
-------
Net investment income 0.03 0.05 0.06 0.04 0.03 0.02
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
----------- ----------- ---------- ---------- -------- --------
Total from investment operations 0.03 0.05 0.06 0.04 0.03 0.02
----------- ----------- ---------- ---------- -------- --------
Less distributions
- ----------
Dividends from net investment
income (0.03) (0.05) (0.06) (0.04) (0.03) (0.02)
Distributions from realized gains
on investments -- -- -- -- -- --
----------- ----------- ---------- ---------- -------- --------
Total distributions (0.03) (0.05) (0.06) (0.04) (0.03) (0.02)
----------- ----------- ---------- ---------- -------- --------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== ========== ========== ======== ========
Total return (not annualized) 2.61% 5.26% 5.80% 4.09% 3.02% 2.33%
Ratios/Supplemental data
- ----------------
Net assets, end of period(000s) $12,568,081 $10,476,537 $6,923,890 $3,731,629 $729,356 $319,024
Ratio of expenses to average net
assets+ 0.40%* 0.40% 0.40% 0.40% 0.39% 0.29%*
Ratio of net investment income to
average net assets+ 5.20%* 5.14% 5.63% 4.40% 2.97% 3.27%*
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average
net assets 0.68%* 0.70% 0.72% 0.79% 0.82% 0.94%*
Ratio of net investment income
to average net assets 4.92%* 4.84% 5.31% 4.01% 2.54% 2.62%*
</TABLE>
++ Period from April 30, 1992 (commencement of operations) to December 31,
1992.
* Annualized
39
<PAGE> 46
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A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 47
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A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 48
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 49
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 50
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 51
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money funds.
SCHWAB ASSET ALLOCATION FUNDS
Schwab Asset Director(R) -- High Growth Fund
Schwab Asset Director -- Balanced Growth Fund
Schwab Asset Director -- Conservative Growth Fund
Schwab OneSource Portfolios -- Growth Allocation
Schwab OneSource Portfolios -- Balanced Allocation
SCHWAB STOCK FUNDS
Schwab 1000 Fund(R)
Schwab S&P 500 Fund
Schwab Analytics Fund(TM)
Schwab Small-Cap Index Fund(R)
Schwab International Index Fund(R)
Schwab OneSource Portfolios -- International
SCHWAB BOND FUNDS
Schwab Government Bond Funds -- Long-Term and Short/Intermediate
Schwab Tax-Free Bond Funds -- Long-Term and Short/Intermediate
Schwab California Tax-Free Bond Funds -- Long-Term and Short/Intermediate
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds* that seek high current income with
safety and liquidity. Choose from taxable or tax-advantaged alternatives. Many
can be linked to your Schwab account to "sweep" cash balances automatically when
you're between investments. Or, for your larger cash reserves, choose one of our
Value Advantage Investments(R).
Please call 1-800-435-4000 for a free prospectus and brochure for any of the
SchwabFunds(R).
Each prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
This report must be preceded or accompanied by a current prospectus.
* Investments in money market funds are neither insured nor guaranteed by
the U.S. government, and there is no assurance that the funds will be able
to maintain a stable share price of $1.
<PAGE> 52
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
[SCHWABFUNDS FAMILY LOGO]
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISOR
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)1997 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
TF4823R(7/97) CRS 20110 Printed on recycled paper.
